Those dying of tobacco related diseases--about half, and mostly from heart-related disases--don't simply burden themselves. We all end up paying for a portion of their treatment. Thus, fees.

Good comment by boardhead on mortgages. Mortgage deductions are very regressive, and have allowed buy-up and mortgage your house to buy a boat. I would favor moving, with some transition, to a system that only allowed deductions for the first purchase of a home, didn't allow deductions for second (or third) properties, and capped the deduction with some value, say representing an $800,000 home. But I doubt that change in the system is feasible. Realtors and developers contribute heavily to both sides, tend to vote for Republicans, and construction unions work to maximize the benefits to construction workers. The interesting thing about the Tea party is some of them are rank amateurs. It is, in a way, exciting that they might try things that they don't know are infeasible. But the other side is the lots of energy will go into heat, and not much into movement.

Here's a challenge to coboardhead, or any of the rest of you thinking that the fixes to the budget problems are easy. First, there are some salient critiques of the Fair Tax proposal, see for example
http://www.cbpp.org/cms/index.cfm?fa=view&id=3285

Next, let's all play with the same pieces of the Federal budget and think about where reductions and revenues might come from. Here's what's being spent in 2010: $715 billion, or 20% of the budget goes to defense.
$708 billion, another 20%, goes to Social Security, with outlays averaging $1,117/month to 36 million retirees. $753 billion to Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP)
$482 billion in “safety net” programs—“These programs include: the refundable portion of the earned-income and child tax credits, which assist low- and moderate-income working families through the tax code; programs that provide cash payments to eligible individuals or households, including Supplemental Security Income for the elderly or disabled poor and unemployment insurance; various forms of in-kind assistance for low-income families and individuals, including food stamps, school meals, low-income housing assistance, child-care assistance, and assistance in meeting home energy bills; and various other programs such as those that aid abused and neglected children.”

The other 20% of the budget is scattered around different programs, with retiree benefits—Federal employees and veterans the largest at 7%, transportation infrastructure and education at 3%, and scientific and medical research at 2%. The interest on the debt is $209 billion, or 6%. (source: http://www.cbpp.org/cms/index.cfm?fa=view&id=1258)

The other part of the story is tax deductions, those things that make the code so complicated. They're huge--they total $1.1 trillion in deductions, spread over 200 different measures. The largest three are not treating employer-paid health care as income ($110 billion), 401(k) exemptions ($106 billion), and mortgate interest--sorry, only third at $103 billion. Now you TEA partiers out there, exactly what are you going to change, and exactly how are you going to collect the votes in Congress?

One thing to add to Macs great post. Much of that spending is on jobs. Eliminating The IRS can save money only by putting over a 100K folks out of work.
Flat Tax
When I passed through the Khyber Pass with my "rich' Afghan friends the bus would always get robbed. The Gov got tired of fighting them and let them ambush the buses and charge a one Afghani "tax".
The women were hard to collect from, since they had little money. Waving a bag too close to their faces was dangerous for the tax collector, since she might have relatives who are worse murderers than he was.
Adjusted Tax Rate
I guess coming up short was not an option so if she got a deduction then I had to pay more.I would put in 5 Afghanis and he still shook it at me, but my friends stayed my urge to pay more.
Limits On Rich Peoples Taxes.
It turned out he was afraid of me also because I had the money to pay his own cohorts to have him killed in the night when he was squatting to pee.
Price around $500 Afghanis -about US$60 at the time.
I think systems of taxation always move from simple to complex .

Last edited by keycocker on Sun Sep 26, 2010 5:55 pm; edited 1 time in total

Eliminating The IRS can save money only by putting over a 100K folks out of work.

I'm not about to regurgitate or debate two Fair Tax books, its extensive website, and the dozens of hours of debate I've seen and/or heard on it, but for example, IRS data show that the so-called Tax Gap inherent in the present system costs each taxpayer in America an average of $3,112 in 2006 ... MUCH more by now. A flat tax system such as the Fair Tax would eliminate that hidden but totally real cost to individual taxpayers.

No systematic tax structure in history has been researched as thoroughly as has the Fair Tax. The FairTax academic research team, which consisted of leading economists from Harvard University, Stanford University, Boston University, Rice University, MIT, the National Bureau of Economic Research, the CATO Institute, the Heritage Foundation, and the Argus Group, crafted and tested methods by which the desires of the public could be fulfilled. The resulting plan, the FairTax, was found [I vaguely recall their research budget as many millions of dollars] to be effective both from a public policy perspective (it is a sound, effective tax plan which will greatly help the economy as a whole as well as individual taxpayers), and from a marketing perspective (when informed about the plan, people embrace it at higher levels than the Flat Tax, the Schaefer/Tauzin sales tax plan, or the current
income tax system).

The Fair Tax won't lower the tax bill at all.
There is no magic in paying less taxes-The gov has to spend less, mostly by firing people.
The GOP tax "reductions" are simply a way of increasing your real tax burden by adding interest to your bill.
Spend less and use any method of taxing you like and your tax bill can go down.
Spend more and use any method of taxing you like and your tax bill always goes up.All parties do this.
Tea Party- step up and list the names of the children who won't eat and the 100s of thousands of Americans to fire, and we can work from that list to cut gov. spending, eventually ending the debt and cutting real taxes.

If from any of my comments, you think that I believe the process of reducing government spending and balancing the budget will be easy, then I haven't been very clear.

I got started on this discussion regarding trusts because I feel that the system of taxation is too compllicated when it requires significant savy or expensive professional help for folks to get in on the "deals" in the code.

One of the complications has to do with deductions. The mortgage interest deduction, that Mac is so found of, benefits the upper middle class in disproportionate measure. ie 60% of tax payers do not even itemize. 50% of the total deduction goes to folks in the top 10% of income bracket.

Got sidetracked on the "Fair Tax" because supporters feel it will simplify the code. This is attractive in it's potential simplicity. I don't think it should be apopted, at least not as a replacement to the entire current system. But why take the whole idea off the table? Why not try to reduce some of the income tax and replace with this tax?

The tax code took years to get where it is. I think our representatives should look at the tax code, and any law, with an eye towards decreasing it's complexity.

Taxes should attempt to pay for their share of the pie. SS does this (in theory), Medicare tax TRIES to do this, gas taxes do. Why not sin taxes? Why not a carbon tax?

You are correct, Mac, the budget has obligations that should not be messed with. Most of it, from my view. But; if we want these things as a society, we HAVE TO PAY FOR IT.

Of this year's 3.6 T budget 2.2 T is paid for with revenue (taxes). 1.2 T is borrowed (Mac's source). In a recession this happens. Short term -maybe no big deal.

But, deficit spending is now in year 9? WTF?

The answer to the big question. How do we balance this budget when nobody wants to step up and say "your program is cut" or "your taxes will go up"? I don't know that answer. I do know that supporting a constant partisan bickering in government is not the answer.

Except for Isobars ranting about a libertarian "think tank" idea, this has stimulated some thinking. I am not fond of the mortgage interest deduction, and I'm sorry I wasn't clearer about that. But having influenced legislation for over 30 years, I am well aware that the existing political systems at both State and National levels are interested in protecting the status quo--because those forces helped put them in office. So as a progressive I am interested in:

--spending less, whether tax credits or direct subsidies, unless we know that the expenditure is a long-term investment in infrastructure or education

--work to have beneficiaries pay their way (social security tries, and is solvent in the short term)

--review benefits and adjust them down if we can't afford them. (Unfortunately, the uber-partisanship of the last 20 years makes it impossible to change something unless a crisis is looming)

--create rserves and trust funds, particularly at the state level, that smooth out sudden changes in tax revenues.

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